Ethanol Will Determine Direction of AG

Extension Economist Mike Duffy, Iowa State University, prefaces his answers to all questions about the agricultural economy by noting that ethanol is driving everything right now. “I say this because it is influencing all facets of Midwest agriculture, and so it will influence the answers,” Duffy says. “How it goes over the next few years will determine the directions for pretty much everything.”

FIN: What are the major input buying trends you are seeing in Midwest farming?

DUFFY: The biggest change has been an examination of crop rotations. Many farmers are looking at ways to get more corn into the rotation. Whether this will continue or expand remains to be seen. The possible change in rotation has increased the need for precision agriculture, especially as it relates to nitrogen application.

How to farm and use less energy will be a major discussion point. What machinery to use, how to use it, variety selection, maintenance, and so forth will be major considerations.

What technologies in farm machinery are on the horizon? What concepts are researchers talking about?

Water quality will be a consideration, especially if we continue to see the increased corn acres. Farmers will be looking for more ways to minimize environmental damage. As a result, there will be a resurgence of interest in minimizing tillage trips for environmental and energy use reasons.

Machinery as it relates to corn stover and other biomass harvesting also will be important. This will be driven a lot by the direction biomass takes, but for now there will be expanding interest in these areas.

What would you be doing if you were a Midwestern crop producer? How would you be changing your operation or the products you buy?

If I were a large farmer who relied primarily on volume, I would be watching my costs, especially land costs. I also would be watching and planning for higher energy costs and doing what I could today to be ready for ever-increasing costs in the future.

I would be sure I was using the best technology that could produce profitable yields and keep a handle on costs. I would not pay too much rent. If it means letting a piece of ground go or passing it up, then I would. You have to know your cost structure and situation, but land is going to continue to be very expensive. I also would be looking at where I was planning to market. There are more opportunities today.

If I were a more moderate-sized producer with less expansion opportunities, I would be evaluating some of the specialty options that are still available: low-linoleic beans and other attributes — maybe even organic or completely different production. As the bulk market expands, it will open more opportunities to move into some of the other markets that will have to continue to provide premiums and maybe increase premiums to get the commodity they need.